The following discussion and analysis of our financial condition and results of
operations should be read in conjunction with our unaudited condensed financial
statements and related notes included elsewhere in this Quarterly Report on Form
10-Q and our audited financial statements and the related notes and the
discussion under the heading "Management's Discussion and Analysis of Financial
Condition and Results of Operations" for the fiscal year ended December 31, 2021
included in our Annual Report on Form 10-K. This discussion, particularly
information with respect to our future results of operations or financial
condition, business strategy and plans and objectives of management for future
operations, includes forward-looking statements that involve risks and
uncertainties as described under the heading "Forward-Looking Statements" in
this Quarterly Report on Form 10-Q for a discussion of important factors that
could cause our actual results to differ materially from those anticipated in
these forward-looking statements.
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Insight

We are a health technology company, and our mission is to enable personalized,
proactive and informed healthcare that empowers people to live their healthiest
lives. Our proprietary platform, the Cue Integrated Care Platform, which is
comprised of our Cue Health Monitoring System, Cue Data and Innovation Layer,
Cue Virtual Care Delivery Apps, and Cue Ecosystem Integrations and Apps, enables
lab-quality diagnostics-led care at home, at work or at the point of care. Our
platform is designed to empower stakeholders across the healthcare ecosystem,
including consumers, providers, enterprises and payors with paradigm-shifting
access to diagnostic and health data to inform care decisions. We are helping
pioneer a new continuous care model that we believe has the potential to
significantly improve the user experience, provide measurable and actionable
clinical insights, and increase efficiency within the healthcare ecosystem. We
believe this model, powered by our platform, will allow users to actively manage
their health, which we believe will lead to improved health outcomes and a more
resilient, connected, and efficient healthcare ecosystem for all stakeholders.

The Cue Integrated Care Platform consists of the following hardware and software
components: (1) our revolutionary Cue Health Monitoring System, made up of a
portable, durable and reusable reader, or Cue Reader, a single-use test
cartridge, or Cue Cartridge, and a sample collection wand, or Cue Wand, (2) our
Cue Data and Innovation Layer, with cloud-based data and analytics capability,
(3) our Cue Virtual Care Delivery Apps, including our consumer-friendly App and
our Cue Enterprise Dashboard, and (4) our Cue Ecosystem Integrations and Apps,
which allow for integrations with third party applications and sensors.

Our Cue Health Monitoring System is designed to deliver a broad menu of tests
through one system, enabling two major testing modalities, nucleic acid
amplification, or NAAT, and immunoassays, in one device. Our system is designed
to handle different sample types, including saliva, blood, urine and swabs, and
can detect nucleic acids, small molecules, proteins and cells. We believe this
will enable us to address many of the diagnostic tests conducted in clinical
laboratories, such as tests addressing indications in respiratory health, sexual
health, cardiac and metabolic health, women's health, men's health, and chronic
disease management.

Initial Public Offering

The Company's registration statement related to its initial public offering
("IPO") was declared effective on September 23, 2021, and the Company's common
stock began trading on the Nasdaq Global Stock Market ("Nasdaq") on September
24, 2021. On September 28, 2021, the Company completed its IPO of 14,375,000
shares of the Company common stock at an offering price of $16.00 per share,
including 1,875,000 shares purchased pursuant to the exercise in full of the
underwriters' option to purchase additional shares. The Company received
aggregate net proceeds of approximately $206.0 million after deducting
underwriting commissions and legal, accounting, and consulting fees related to
the IPO.

Upon completion of the IPO, Convertible Notes outstanding in the principal
amount of $235.5 million and accrued interest of $2.8 million were automatically
converted into 18,611,914 shares of common stock. All outstanding shares of the
Company's redeemable convertible preferred stock were converted into 83,605,947
shares of common stock. Immediately prior to the IPO, all of the Company's
outstanding warrants to purchase redeemable convertible preferred stock were
converted into the redeemable convertible preferred stock and the related
warrant liabilities were reclassified to additional paid-in capital.

Impact of COVID-19

While the ongoing global COVID-19 pandemic has adversely impacted global
commercial activity, it served as a catalyst to accelerate our product pipeline
and commercialization of our platform. We began selling and recording product
revenue for our COVID-19 test in August 2020 after obtaining our first FDA EUA
in June 2020. Currently, all of our product revenue is related to sales of our
Cue COVID-19 test.

In December 2020, the FDA issued EUA for two COVID-19 vaccines and in February
2021, the FDA issued a third EUA for a COVID-19 vaccine. The widely-administered
use of an efficacious vaccine or the availability of therapeutic treatments for
COVID-19 may reduce the demand for our COVID-19 test and could cause the
COVID-19 diagnostic testing market to fail to grow or to decline. However, we
believe the need for ongoing detection and monitoring will continue even after
effective vaccines have been widely distributed and administered. We also
believe COVID-19 will remain endemic for the foreseeable future and demand for a
fast and accurate test to confirm a diagnosis and seek timely and appropriate
treatment may fluctuate based on COVID-19 infection rates and variants. Even
while vaccine efforts are underway, public health measures, like testing, will
likely need to stay in effect to protect against COVID-19. However, given the
unpredictable nature of the COVID-19 pandemic, the development and potential
size of the COVID-19 diagnostic testing market is highly uncertain.
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Certain key factors affecting our performance

manufacturing capacity

We manufacture all of our Cue Cartridges in our vertically integrated facilities
in San Diego, California. We also produce all of our biochemistry in-house,
including critical enzymes, antibodies and primers for our Cue Cartridges.
Production of our Cue Readers is performed for us by third-party contract
manufacturers and production of our Cue Wands is performed by both us and by
third-party contract manufacturers. We continue to optimize our manufacturing
capabilities, including our fully automated production pods. A production pod is
a free standing, modular environmentally controlled structure containing an
automated cartridge production line.

Investments in our growth

We expect to make continued significant investments in our business to drive
growth, and therefore we expect our expenses to increase going forward. We
expect to invest significant resources in sales and marketing to drive demand
for our products and services as well as research and development to enhance our
platform and bring additional tests to market. We also intend to continue
investing in our supply chain and logistics operations. As we continue to scale
our business, we expect to hire additional personnel and incur additional
expenses, including those expenses in connection with our becoming a public
company.

Expand our customer base

Following the completion of our obligations under the U.S. DoD Agreement in
December 2021, the future commercial success of our diagnostic products is
dependent on our ability to broaden our customer base beyond the U.S. government
and public sector to include enterprise employers, healthcare providers and
direct-to-consumer. As a result, our long term growth depends on our ability to
renew and acquire new customers. Current key strategic relationships include
BARDA, Google LLC, or Google, the Mayo Clinic, the National Basketball
Association, and Henry Schein, Inc. We intend to leverage our success with our
COVID-19 test and the expansion of our manufacturing capabilities to enable
broad distribution of our Cue Readers and awareness of our platform across
different groups of customers and to enhance pull-through of our future tests.

Improve and expand our menu of testing and software capabilities

Currently, our only commercially available test is our molecular COVID-19 test.
A key part of our growth strategy is to expand our menu of tests to include
other diseases, ailments and general health markers, which we expect will
support our growth and continue to contribute to the utility of our platform,
including the Cue Health Monitoring System. We are currently developing tests in
the fields of respiratory health, sexual health, cardiac and metabolic health,
women's health, men's health, and chronic disease management. As we continue to
develop and expand our menu of tests, we have made, and will continue to make,
significant investments in our business, particularly in research and
development, sales and marketing and the hiring of additional personnel.
Investing in research and development will allow us to develop new tests as well
as enhance our current product offerings and our Cue Integrated Care Platform.
To build out our menu of tests and bring additional products to market, we will
need to hire additional personnel, such as engineers and researchers, as well as
develop robust sales and marketing and customer support teams to be able to sell
our products.

Regulatory clearance of our diagnostic products

Our commercial success will depend upon a number of factors, some of which are
beyond our control, including the receipt of regulatory clearances, approvals or
authorizations for existing or new product offerings by us, product
enhancements, or additions to our proprietary intellectual property portfolio.
While we have received two EUAs for our COVID-19 test, a CE mark in the European
Union, an Interim Order authorization from Health Canada, and regulatory
approval from CDSCO, our COVID-19 test has not been FDA cleared or approved and
is only authorized for emergency use during the declaration that circumstances
exist justifying the authorization of emergency use, and this declaration could
be terminated, or our authorization could be revoked in the future. We will need
to seek additional regulatory approval for our COVID-19 test if the EUA
declaration or Interim Order is terminated or otherwise revised or revoked, and
we will need to seek regulatory authorization, clearance or approval for our
other diagnostic products in development. In addition, we will not be able to
commercialize any other tests for our platform unless we obtain required
regulatory clearances or other necessary approvals or authorizations. As such,
our ability to navigate, obtain and maintain the required regulatory clearances,
approvals or authorizations, as well as comply with other regulatory
requirements, for our products will in part drive our results of operations and
impact our business.

Reimbursement and insurance coverage

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We have been granted two EUAs by the FDA for our COVID-19 test for point-of-care
and at-home and over-the-counter indications. The commercial success of our
COVID-19 test, and any of our subsequently developed tests, is dependent on a
customer's ability to be able to pay for or otherwise be reimbursed for the
purchase of a test, whether out-of-pocket, by insurance or from a governmental
or other third-party payor. We believe payment for our products, including our
Cue COVID-19 Test Kits, will be billable by a physician, reimbursable by
government payors or insurance companies, paid for by a self-insured employer,
or eligible under FSA and HSA guidelines. For example, most of our contemplated
future tests that are currently offered by others through central labs are
reimbursable by health plans and governmental payors if properly ordered by a
physician. These third-party payors decide which products will be covered and
establish reimbursement levels for those products. Coverage criteria and
reimbursement rates for clinical laboratory tests are subject to adjustment by
payors, and current reimbursement rates could be reduced, or coverage criteria
restricted in the future. If the Cue Health Monitoring System, including any of
our current or future tests, are not reimbursable or covered by insurance, our
business may be materially and adversely impacted.

Seasonality

We anticipate that fluctuations in customer and user demand for our COVID-19
test may be similar to those related to influenza, which typically increases
during the fall and winter seasons. Although our products will be available
throughout the year, we anticipate that we may experience higher sales during
the fall and winter seasons, relative to the spring and summer seasons. However,
as our portfolio of diagnostic offerings increases beyond our COVID-19 test, we
expect the impact of this seasonality on our results to decrease.

Summary of the first quarter of 2022 (on a comparative basis)

Key GAAP financial results for the three months ended March 31, 2022 were as follows compared to the three months ended March 31, 2021:

• Turnover was $179.4 million compared to $64.5 million; •Product gross margin was 51% vs. 53%; • Net income was $2.8 million compared to $13.0 million and; • Diluted earnings per share were $0.02 compared to $0.08

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Operating results

The following table sets forth a summary of our results of operations for the
periods indicated:

                                                                     Three Months Ended March 31,
                                                                      2022                    2021
(dollars in thousands)                                                       (unaudited)
Revenue:
Product revenue                                                $        177,454          $    64,499
Grant and other revenue                                                   1,956                    -
Total revenue                                                           179,410               64,499
Operating costs and expenses:
Cost of product revenue(1)                                               86,697               30,035
Sales and marketing                                                      34,168                  430
Research and development                                                 28,787                7,409
General and administrative                                               26,910               11,870
Total operating costs and expenses                                      176,562               49,744
Income from operations                                                    2,848               14,755
Interest expense                                                            (51)                (535)

Other income, net                                                             6                   37
Net income before income taxes                                            2,803               14,257
Income tax expense                                                            -                1,226
Net income                                                     $             2,803       $       13,031
Net income per share attributable to common stockholders -
diluted                                                        $              0.02       $         0.08


__________________

(1)Includes $9.6 million and $4.1 million amortization expense for the three months ended March 31, 2022 and 2021, respectively. __________________

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Comparison of three months ended March 31, 2022 and 2021

The following table provides a summary of our operating results for the three months ended March 31, 2022 and 2021 and variations between periods:

Three months completed March, 31st,

                                                  2022                    2021                     $ Change                   % Change
(dollars in thousands)                                                               (unaudited)
Revenue:
Product revenue                            $          177,454       $          64,499       $              112,955                     175%
Grant and other revenue                                 1,956                       -                        1,956                      n.m
Total revenue                                         179,410                  64,499                      114,911                     178%
Operating costs and expenses:
Cost of product revenue                                86,697                  30,035                       56,662                     189%
Sales and marketing                                    34,168                     430                       33,738                   7,846%
Research and development                               28,787                   7,409                       21,378                     289%
General and administrative                             26,910                  11,870                       15,040                     127%
Total operating costs and expenses                    176,562                  49,744                      126,818                     255%
Income from operations                                  2,848                  14,755                     (11,907)                    (81%)
Interest expense                                         (51)                   (535)                          484                    (90%)

Other income, net                                           6                      37                         (31)                    (84%)
Net income before income taxes                       2,803                14,257                     (11,454)                        (80) %
Income tax expense                                       -                 1,226                      (1,226)                          n.m.
Net income                                 $            2,803       $          13,031       $             (10,228)                   (78) %
Net income per share attributable to
common stockholders - diluted              $             0.02       $            0.08       $                    -                   (78) %


n.m. = not meaningful

Revenue increased to $179.4 million in the three months ended March 31, 2022,
from $64.5 million in the three months ended March 31, 2021. The increase was
primarily due to the continued expansion of our customer base and increases in
production capacity. Revenue during the three months ended March 31, 2022 was
primarily driven by product sales to private sector customers of $175.8 million
along with product sales to public sector clients of $1.6 million.

Cost of Product Revenue increased to $86.7 million in the three months ended
March 31, 2022, from $30.0 million in the three months ended March 31, 2021.
This increase was primarily due to a substantial increase in the sales of our
products. Our product gross profit margin, or product gross profit as a
percentage of product revenue was approximately 51% in the three months ended
March 31, 2022 compared to approximately 53%, in the three months ended
March 31, 2021. This decrease was primarily related to supply chain constraints
and associated higher component, transport costs as well as customer mix.

Sales and Marketing Expense increased to $34.2 million in the three months ended
March 31, 2022, from $0.4 million in the three months ended March 31, 2021. This
increase related to increased sales and marketing personnel costs to support a
broadening of our customer base, planned additions to our product offering and
higher expenses related to our overall marketing and brand expansion efforts.

Research and Development Expense increased to $28.8 million in the three months
ended March 31, 2022, from $7.4 million in the three months ended March 31,
2021. This increase was primarily driven by additional headcount, materials and
other resource utilization associated with the expansion of our platform,
including new test development and overall enhancement of our software platform
for products under development, as well as costs related to clinical studies for
510(k) approval of our COVID-19 and influenza tests.

General and administrative expenses increased to $26.9 million within three months March 31, 2022 from $11.9 million within three months
March 31, 2021. This increase is mainly related to an increase in shares

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compensation expenses, headcount growth to support our overall expansion as well
as accounting and other consulting-related costs to support our operations as a
public company.

Interest Expense decreased to $0.1 million in the three months ended March 31,
2022 from $0.5 million in the three months ended March 31, 2021. This decrease
was primarily driven by debt repayment activity in the prior year. Our interest
expense prior to February 2021 primarily consisted of expense related to our
prior loan and security agreement with Comerica Bank. In February 2021, we
entered into the Revolving Credit Agreement. In connection with the Revolving
Credit Agreement, we repaid outstanding amounts of $5.4 million and terminated
the 2015 Credit Agreement we initially entered into in May 2015. In May 2021, we
repaid the outstanding balance under the Revolving Credit Agreement. In June
2021, we terminated the Revolving Credit Agreement.

Income Tax Expense was $0 in the three months ended March 31, 2022 compared to
$1.2 million in the three months ended March 31, 2021, and our effective tax
rate was 0% in the three months ended March 31, 2022, compared to 8.6% in the
three months ended March 31, 2021. The fluctuation in our provision and
effective tax rate was primarily due to the Company maintaining a full valuation
allowance against its net deferred tax assets. The tax expense recorded for the
three months ended March 31, 2021 was related to deferred tax liabilities
arising from accelerated depreciation deductions for federal tax purposes and
current state income taxes in jurisdictions for which the Company did not have
available tax attributes.

Cash and capital resources

Insight

As of March 31, 2022, we held $426.5 million of cash and cash equivalents as a
result of our IPO proceeds and other financing activities. Our primary cash
needs are for the funding of day-to-day operations, financing capital
investments and to address our working capital needs. Our largest source of
operating cash generation is from sales to our customers. Our primary uses of
cash from operating activities are for personnel-related expenses, material and
supply costs for manufacturing, direct costs to deliver our products, and sales
and marketing expenses and research and development initiatives.

Based on our current business plan, we believe our anticipated operating cash
flows, together with our existing cash and cash equivalents, will be sufficient
to meet our working capital and capital expenditure requirements for at least
the next 12 months.

We expect that our near and longer-term liquidity requirements will consist of
working capital and general corporate expenses associated with the growth of our
business, including, without limitation, expenses associated with scaling up our
operations and continuing to increase our manufacturing capacity, sales and
marketing expense associated with rollout of our over-the-counter, at home
COVID-19 test to commercial customers, including directly to consumers,
increasing market awareness of our platform and brand generally to individual
consumers, enterprises and other target customers, additional research and
development expenses associated with expanding our care offerings, expenses
associated with continuing to build out our corporate infrastructure and
expenses associated with being a public company. Our short-term capital
expenditure needs relate primarily to the expansion of our research and
development capabilities, expanding production capacity and optimization of
existing business processes.

Cash flow

The following table summarizes our cash flows for the periods indicated:

                                                                         Three Months Ended
                                                                             March 31,
                                                                      2022                2021
(dollars in thousands)                                                      (unaudited)

Net cash, cash equivalents and restricted from (used in) operating activities

                                             $    

31,521 ($35,113)
Net cash, cash equivalents and restricted cash used in investing activities

                                                           (14,055)            (31,841)

Net cash, cash equivalents and restricted (used) cash from financing activities

                                        (873)             56,641

Net change in cash, cash equivalents and restricted cash $16,593 ($10,313)

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Cash flow from operating activities

Net cash, cash equivalents and restricted cash provided by operating activities
was $31.5 million in the three months ended March 31, 2022, primarily reflecting
our net income of $2.8 million, net of non-cash cost items and changes in
operating working capital. Non-cash cost adjustments were primarily driven by
depreciation and amortization expenses of $10.6 million and stock-based
compensation expense of 16.0 million. The timing of our revenue and collections
decreased our accounts receivable. Inventory increase was driven by our effort
to limit the effects of a potential future supply chain disruption combined with
a tempering of COVID-19 testing demand in the latter part of the first quarter.

Net cash, cash equivalents and restricted cash used in operating activities was
$35.1 million in the three months ended March 31, 2021, primarily reflecting our
net income of $13.0 million offset by increases in inventory and accounts
receivable of $14.8 million and $9.4 million, respectively. In addition, there
were decreases in accounts payable and deferred revenue of $14.8 million and
$16.0 million, respectively. These fluctuations were due to the expansion of
production facilities and increases in product revenue.

Cash flow from investing activities

Net cash, cash equivalents and restricted cash used in investing activities was
$14.1 million for the three months ended March 31, 2022, reflecting purchases of
property and equipment of $12.8 million to expand our R&D and production
capabilities. We also invested $1.3 million in the development of internal-use
software related to COVID-19 Testing apps for commercial customers.

Net cash, cash equivalents and restricted cash used in investing activities was
$31.8 million in the three months ended March 31, 2021, primary reflecting
purchases of property and equipment of $30.5 million to expand our production
capabilities of our COVID-19 Test Kits in relation to the U.S. DoD Agreement.

Cash flow from financing activities

Net cash used in financing activities for the three months ended March 31, 2022
of $0.9 million was primarily driven by $0.7 million in tax withholding on stock
option exercises and RSU vesting and $0.7 million in payments for finance
leases. These cash outflows were offset by proceeds of $0.3 million from stock
options exercised.

Net cash, cash equivalents and restricted cash provided by financing activities
was $56.6 million for the three months ended March 31, 2021, primarily
reflecting proceeds received from the Revolving Credit Agreement in February
2021 partially offset by repayment of the borrowings under the 2015 Credit
Agreement.

Commitments and contingencies

See Note 15, Commitments and Contingencies, to our unaudited interim condensed
financial statements included elsewhere in this quarterly report for a summary
of our commitments as of March 31, 2022. Our material cash commitments at
March 31, 2022 related to finance leases of manufacturing equipment totaling
$6.5 million, real estate leases under non-cancelable operating lease agreements
in the amount of $69.9 million, that expire at various dates through 2031 and a
legal settlement of a contract dispute totaling $9.0 million, of which $4.5
million has not been paid. We expect to fund these commitments using our
existing cash on hand.

From March 31, 2022we had outstanding letters of credit totaling $12.5 million with Eastern West Bank. We also had outstanding letters of credit with
Comerica Bank related to our real estate leases totaling $0.5 million. All letters of credit are collateralized in cash and recorded on the balance sheet as restricted cash. In November 2021, $0.8 million cash was restricted as part of a customs bond on international imports

Off-balance sheet arrangements

We did not have during the periods presented, and we do not currently have, any
off-balance sheet arrangements, as defined in the rules and regulations of the
SEC.

Significant Accounting Policies and Estimates

For a description of our critical accounting policies and estimates, refer to
Part II, Item 7, Critical Accounting Policies and Estimates in our Annual Report
on Form 10-K for the year ended December 31, 2021. There have been no
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material changes to the company’s significant accounting policies and estimates from its annual report on Form 10-K for the year ended December 31, 2021.

Recently Adopted and Issued Accounting Pronouncements

Recently issued and adopted accounting pronouncements are described in Note 2 to our financial statements included elsewhere in this document.

Emerging Growth Company Status

We are an "emerging growth company" (as defined in the JOBS Act). Section
102(b)(1) of the JOBS Act exempts emerging growth companies from being required
to comply with new or revised financial accounting standards until private
companies (that is, those that have not had a Securities Act registration
statement declared effective or do not have a class of securities registered
under the Exchange Act) are required to comply with the new or revised financial
accounting standards. The JOBS Act provides that an emerging growth company can
elect to opt out of the extended transition period and comply with the
requirements that apply to non-emerging growth companies but any such election
to opt out is irrevocable. We have elected to use this extended transition
period under the JOBS Act until the earlier of the date we (i) are no longer an
emerging growth company or (ii) affirmatively and irrevocably opt out of the
extended transition period provided in the JOBS Act. As a result, our financial
statements may not be comparable to companies who have adopted new or revised
accounting pronouncements.

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